Gold, not dollar, is the best trump trade

Proponents of the precious metal as a haven play in case of Trump’s reelection outnumbered those picking the US dollar two-to-one among the 480 respondents. Just over 60% of those surveyed see the greenback ultimately weakening in the event the Republican candidate secures another presidential term.

History is on their side. A Bloomberg gauge of the dollar slid more than 10% while the spot price of gold rallied over 50% during Trump’s four years in office.

Trump’s platform of tax cuts, tariffs and weaker regulation are viewed as inflationary on Wall Street and could even force the Federal Reserve to increase interest rates again. A red wave in November that ushers in Republican control of Congress, granting Trump greater leeway in enacting sweeping economic policies, could further ignite the precious metal as prices hover near all-time highs.

“Gold sits in a prime position to rally,” according to Gregory Shearer, an analyst at JPMorgan Chase & Co. Geopolitical tensions, the growing US deficit, reserve bank diversification and inflation hedging have all driven bullion prices higher, “these factors likely endure regardless of the election outcome but could be further magnified under a Trump 2.0 or ‘red wave’ scenario,” he wrote July 24.

A number of respondents to the MLIV Pulse survey seemed to agree: “All I can see are severe disruptions to markets and trade, and rapid increases” in the US national debt, one said.

Bullion’s gains during the Trump presidency were in part fueled by investors seeking safety as the Covid-19 pandemic hit and the federal funds rate fell to near zero. Gold — which pays no interest — reached what was back then a record high in August 2020 amid global lockdown jitters.

It wasn’t even the biggest surge under a president we’ve seen in the past fifty years — returns under George W. Bush and Jimmy Carter were far greater.

This time around, the macro backdrop is again favorable for bullion. The Fed is expected to start to cut interest rates in September. Central banks have been scooping up gold aggressively since 2022 in an effort to diversify away from the dollar.

Two-thirds of survey responders expect a Trump reelection to undermine the dollar’s status as the world’s reserve currency.

Kathryn Rooney Vera, chief market strategist at StoneX Group, says a Trump second term could exacerbate the move away from the greenback as the private sector joins central banks in the rotation.

“Client portfolios are adding gold holdings. There’s a lot of expectations of a weaker dollar,” she said. “Technical, structural and fundamental factors are all supportive of gold.”

But, betting that the dollar will weaken under Trump is a contentious view as top economists on Wall Street see a second Trump term strengthening, not weakening, the currency. His bias for harsher tariffs on US trading partners and deficit-boosting fiscal policies could interrupt the Fed’s anticipated interest-rate cuts, they said.

MLIV Pulse respondents were divided over the impact Trump economic policies would have on the dollar. One respondent saw a weaker dollar no matter what the election outcome: “Sustained high deficits and lower interest rates will push further de-dollarization and begin a sovereign debt crisis. It’ll be the same if Kamala Harris wins.”

The dollar and US Treasuries are often viewed as global havens during times of geopolitical stress. But the survey responses indicate that the greenback may not be the beneficiary of homegrown political volatility.

“When the US is creating its own risk premium due to a potentially disorderly election, the fiscal implications of a Trump presidency, that makes the dollar in 2025 a risk,” said Kathleen Brooks, research director at XTB.

The MLIV Pulse survey was conducted from July 22 to July 26 among Bloomberg News terminal and online readers worldwide who chose to engage with the survey, and included portfolio managers, economists and retail investors. This week, the survey asks whether high interest rates in the US made you richer or poorer. Share your views here.